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Inflation Targeting in Emerging Market Economies

In: NBER Macroeconomics Annual 2003, Volume 18

  • Arminio Fraga
  • Ilan Goldfajn
  • André Minella

This paper assesses inflation targeting in emerging market economies (EMEs), and develops applied prescriptions for the conduct of monetary policy and inflation-targeting design in EMEs. We verify that EMEs have faced more acute trade-offs - higher output and inflation volatility - and worse performance than developed economies. These results stem from more pronounced external shocks, lower credibility, and lower level of development of institutions in these countries. In order to improve their performance, we recommend high levels of transparency and communication with the public and the development of more stable institutions. At an operational level, we propose a procedure that a central bank under inflation targeting can apply and communicate when facing strong supply shocks, and suggest a monitoring structure for an inflation-targeting regime under an IMF program.

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This chapter was published in:
  • Mark Gertler & Kenneth Rogoff, 2004. "NBER Macroeconomics Annual 2003, Volume 18," NBER Books, National Bureau of Economic Research, Inc, number gert04-1, May.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 11446.
    Handle: RePEc:nbr:nberch:11446
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